Belarus as the Biggest Beneficiary Of The Eurasian Integration?

On 24 January the Eurasian Development Bank released an interesting report on the prospects of Eurasian economic integration. The report presented the findings of a research project conducted by a group of Russian and Ukrainian economists under the aegis...

On 24 January the Eurasian Development Bank released an interesting report on the prospects of Eurasian economic integration. The report presented the findings of a research project conducted by a group of Russian and Ukrainian economists under the aegis of the Eurasian Development Bank, the main mission of which is to facilitate integration of post-Soviet economies. One of the report's conclusions is that Belarus will be the main beneficiary of the newly formed Single Economic Space and subsequent stages of the Eurasian integration.

Even without discussing in detail the report's research methodology, there are too many ifs in it. It is very unlikely that the incumbent Belarusian leadership will be able to make full use of opportunities that the Single Economic Space can offer. The reality is that instead of working on a coherent long-term strategy and creating a business-friendly environment, Belarusian authorities usually focus on gaining short-term subsidies and other economic preferences from Russia.

Report's Optimistic Forecasts

The report is remarkable for a comprehensive analysis of numerous scenarios of the Eurasian integration. The analysis goes beyond the existing format of the Single Economic Space of Belarus, Kazakhstan and Russia and also deals with the prospects of Ukraine joining the club.

Four out of six report's scenarios foresee some form of Ukraine's participation in the integration process. Thus, an important goal of the study is to demonstrate and quantify the benefits for Ukraine if it prefers the Eurasian integration to the European Union Free Trade Zone.

However, the researchers come to the conclusion that it is Belarus which will benefit most of all:

by virtue of the prevailing economic structure, the primary thrusts of foreign-trade ties, and economies of scale, the greatest effects are observed in Belarus.

According to their calculations, the Belarus GDP will annually gain up to 15% by 2030. In absolute numbers the gain is estimated at USD 14 billion a year (in 2010 prices) by 2030 or about USD 170 billion over the period 2011-2030. For the other countries the gains are estimated at a lower level. Kazakhstan will annually gain 3,4% of the GDP by 2030, Russia – 1,9% and Ukraine (if it becomes a fully-fledged part of the SES) – 6-7%.

The report also says that Belarusian exports to the rest of the Single Economic Space will account for 35% of the cumulative volume of its national GDP. However, this figure does not look very attractive as in 2011 Belarusian exports to Russia and Kazakhstan only amounted to approximately the same slice of the GDP (if the latter is calculated at the market exchange rate).

The report also predicts that without Ukraine the cumulative GDP of the Single Economic Space will gain more than USD 900 billion over the period 2011-2030. And if Ukraine joins the cumulative gain will exceed USD 1,1 trillion.

Wishful Thinking?

So the picture drawn by the study of Belarus’s future in the Single Economic Space looks shimmering and bright. It is not surprising, therefore, that the Belarusian official media reported the research findings with a great deal of excitement.

However, the text of the study itself and some additional analysis cast numerous doubts as to the potential of the Single Economic Space.

The authors of the study emphasize that the findings of their research can only be correct "if all the declarations that were made in the previous years will be turned into real actions." In other words, if the states will not break their commitments to build a functioning common economic space with no behind-the-scenes barriers for free movement of goods, services, capital and labor force.

The report also expects the states to adjust their macroeconomic policies in accordance with international agreements, get used to free market competition and accept the coordinating role of the supranational Eurasian Economic Commission. The latter task is particularly problematic for the authoritarian states that form the Single Economic Space.

For Belarus the declared rules literally mean that the so-called ‘Belarusian economic model’ (a predominantly administrative economy where the state’s share is about 80% and only some elements of market economy exist) has to be left on the ash heap of history. There is no way in which the government can continue its administrative regulation of the economy and simultaneously remain faithful to the Single Economic Space agreements. The Belarusian leadership is very unlikely to give up such practices. This will deprive the regime of a great deal of political clout and expose the economy to multiple uncertainties with the potential of political repercussions.

Real Prospects in the Single Economic Space

This is not to say that Belarus cannot in principle gain from the Single Economic Space. The reality is that the incumbent government is clearly not ready to adhere to the ‘roadmap’ of the Eurasian integration. It is focused on the short-term benefits, such as discounted gas and oil prices, loans and good export contracts for state enterprises. But it does not think much about long-term opportunities and strategies. Not yet, at least. The authorities’ attitudes towards Belarusian business clearly indicate that.

Although the government promised certain positive improvements to the taxation system, already in January the government shocked business with new decisions. For example, it resurrected an ecological tax and introduced a two and half fold increase in taxation of individual entrepreneurs. Importantly, it was done in violation of last year’s liberalization Directive No. 4. Needless to say, there were no prior consultations with business associations. These decisions were interpreted by Belarusian and foreign entrepreneurs as new signs of poor prospects for doing business in Belarus.

Thus, it is very doubtful that Belarusian gains from the Single Economic Space can be nearly as high as calculated in the Eurasian Development Bank’s report. However, Belarus can gain significantly in the long term if its authorities become more business-friendly and give up their populist social and economic policies.

Victoria Azarenka – the Bright Side of Belarus

Azarenka and Wozniacki at a 2010 charity event in Minsk (photo: kp.by)

The 22-year-old Belarusian Victoria Azarenka has just defeated Maria Sharapova to win the Australian Open and take over the women's No. 1 tennis ranking. Very few people know that Sharapova's parents are also from Belarus. They fled their home to escape the fallout from the Chernobyl explosion before she was born.

Although Sharapova sometimes visits Homel, the native town of her parents, Azarenka has a much stronger connection with the country. She regards Minsk as her most beloved city where she often travels to to have fun.

Victoria's Early Career in Belarus

Victoria Azarenka was born on July 31, 1989 in the capital of Belarus, Minsk. Her parents were born in the village Seleckaye in the Mahilyou region in the east of the country. They moved to Minsk in 1986 where Victoria was born.

According to minsktennis.com Victoria started practicing tennis at the age of seven. Her first coach in Minsk was Valyantsina Rzhanykh who helped Victoria fall in love with the game and noticed the girl's talent. Already at that time her talent was obvious and she had great determination to succeed.

In an interview with Belarusian tabloid Komsomolskaya Pravda, her first coach said that Viktoria had a very solid character and was never afraid of anybody. She could fight with any opponent even if they were much taller and older then her. Vika, with other Belarusian boys and girls, fielded balls for older players such as Max Mirnyi and Vladimir Volchkov who have represented Belarus in the Davis Cup. Who would have imagined that she would far exceed her idols?

Minsk is Her Most Beloved City

Victoria calls Minsk her favourite city and although she spends most of her time elsewhere, she is always happy to come back. In 2010, Vika organized a charity exhibition match with then No. 1 female tennis player Caroline Wozniacki, to raise money for children in Minsk. This is what she said about the charity match with Wozniacki in Minsk:

This match was broadcasted throughout Europe. We have collected a relatively large sum of money and attracted much attention to the Republican Center for Pediatric Oncology and Hematology. Belarus has never seen anything like it, so it's a lot of spectators, and tickets sold out literally in two days.

The charity tennis event was very successful – many people showed up to support the cause. Azarenka and Wozniacki had an emotional experience when they visited children with cancer in a Minsk hospital.

She regularly follows the development of tennis in Belarus, according to minsktennis.com:

Belarus has more tennis schools now. I wish that we had more juniors, because a lot of kids play well until they reach 14 – 16, and then, unfortunately, they are no longer progressing. I think with the new structure, with new preparation and with new support, there will be more and more tennis players in our country and we will have healthy competition.

Last October in her interview with Belarusian tabloid Komsomolskaya Pravda, she said that she had recently moved from the United States to live in Europe:

I became calmer on the court, began to receive more pleasure from tennis – this brought self-confidence and a more positive attitude. It is important to emphasize that for the next season I will not be training in America, as I have for the last six or seven years. I will work in Monte Carlo, I now live there.

She was then planning her trip to Minsk: "I am flying to Minsk on a direct flight, I will have fun there…"

In recent interview to the Australian Open organizers when asked where she feels at home, she did not hesitate to say that "home is always going to be Belarus."